Biden Orders Ban on 59 Chinese Defense and Tech Firms
WASHINGTON—President Joe Biden signed an executive order on June 3, amending a Trump-era ban that prohibits U.S. investors from investing in Chinese military companies. The new order expands the previous prohibition list by adding more Chinese defense and surveillance technology firms.
The order also moves the authority of selecting targeted companies to the Treasury Department from the Defense Department.
Biden’s order expands the scope of the national emergency declared by then-President Donald Trump last year and bans more companies involved in “the development or use of Chinese surveillance technology to facilitate repression or serious human rights abuse.”
The order “prohibits United States persons from engaging in the purchase or sale of any publicly traded securities” of 59 entities listed in the annex of the executive order.
Blacklisted companies include telecoms equipment maker Huawei, video surveillance manufacturer Hikvision, aerospace firm Aviation Industry Corp. of China, and state-run mobile operators China Mobile and China Telecom.
The Treasury Department will continue to update the list of these Chinese entities. The selection will be determined by the Treasury secretary in consultation with the secretary of state and, if deemed appropriate, the Defense secretary, according to a White House factsheet.
The ban list doesn’t mention subsidiaries of these companies as the list is “intentionally targeted and scoped,” according to the factsheet.
The Trump administration targeted 44 Chinese military companies and intended to include publicly traded subsidiaries that were “50 percent or more owned” or “determined to be controlled” by those companies.
The new order, however, shrinks the scope of the ban by excluding subsidiaries.
The investment prohibitions will take effect on Aug. 2, but investors are permitted to make trades to divest their holding until June 3, 2022.
Sen. Marco Rubio (R-Fla.) raised concerns about Biden’s move to shift the authority to the Treasury Department.
“We know for a fact that Wall Street is helping to finance the Chinese Communist Party’s effort to weaken and ultimately replace American leadership,” Rubio said in a statement.
“While the administration updated the Trump-era policy in important ways, I am very concerned that President Biden’s Treasury Department is too closely aligned with Wall Street to take the actions necessary to prevent American savings from being used to fund the Chinese Communist Party.”
In his final weeks in office, Trump took swift action to ban investments in Chinese military companies, in an effort to curb Beijing’s access to lucrative U.S. capital markets.
Trump’s order aimed to curb U.S. pension and retirement fund investments in companies that support the Chinese Communist Party (CCP). Many of these companies are publicly traded on stock exchanges around the world and are tracked by major indexes such as MSCI and FTSE.
The American Securities Association (ASA), which represents regional Main Street financial services companies, welcomed the new executive order.
“ASA strongly supports today’s action by the Biden Administration to prioritize America’s economic and national security interests by continuing the previous Administration’s crackdown on Communist China’s infiltration of the U.S. capital markets,” ASA CEO Chris Iacovella said in a statement.
“For far too long, the CCP has taken advantage of regulatory loopholes to fund its military rise, a cyber army that attacks us, ‘re-education camps’ used to perpetrate crimes against humanity on its own citizens, the use of slave labor in violation of international law, and its new position as the world’s leading polluter.”